Yum Brands Vice Chairman Apologizes for Chicken Supply Scare

Yum! Brands Inc. (YUM)’s vice chairman
apologized to Chinese consumers for a food safety scandal
involving a former chicken supplier in an letter posted on KFC’s
official microblog.

Yum’s self-inspection processes and internal communications
had been lacking, Sam Su, also chairman of the the Louisville,
Kentucky-based restaurant chain’s China business, said in the
letter today. The company failed to change its suppliers quickly
enough, he said.

Yum, which operates KFC and Pizza Hut outlets in China,
said fourth-quarter same-store sales fell more than projected
there after a government probe into the former supplier. The
Shanghai Food and Drug Administration said on Dec. 20 tests
conducted by a third-party agency from 2010 to 2011 found eight
batches of chicken supplied to Yum by Liuhe Group Co. had
antibiotics levels that didn’t meet prescribed standards.

“I promise you that all of Yum’s employees, starting from
me, will adopt a humble attitude and listen to all sides, doing
our very best to tackle the problem,” Su said in the letter.
“We will make serious changes and raise our management
standards in order to win back your trust.”

Su, who spearheaded Yum’s rise on the mainland and oversaw
the takeover of the Little Sheep Group hot pot chain, pledged to
run more stringent checks on supplier quality and encourage
poultry companies to adopt advanced farming methods. The chain
got 44 percent of its revenue from the nation in 2011.

Yum will learn from the experience and also improve its
communication with government ministries going forward, he said.

Chinasame-store sales dropped 6 percent in the fourth
quarter, compared with a previous estimate for a decline of 4
percent, the company said in an exchange filing this week.